Personal Loans vs. Home Equity Lines of Credit

A lot of homeowners have turned to personal loans and home equity lines of credit, to work their way out of bad financial situations over the last few years. While both of these choices can help you out of your situation, one may be more beneficial than the other. Depending on your situation and what you need the money far are key elements that need to be used when deciding on which type of loan to work with. A personal loan is a designed to get you the money you need, at a respectable interest rate and with a term length you can live with. A home equity line of credit is a revolving line of credit that is based of the equity of your home. The amount of your credit line is based directly off how much of your home is paid off; verse the current market value of your home.

Both of these types of financial assistance have monthly repayment policies and no penalty for paying off the amount early. A home equity line of credit can quickly get out of control if you are not careful and the amount repaid per month is based off of your total balance. This causes the amount that is paid per month for a home equity line of credit, to shift and change. If you are not careful of how much you are spending or if you do not plan appropriately for those changes, you can quickly find yourself not having enough available money each month to make your payments.

A personal loan does not have the same open availability as a home equity line of credit. It is not easy to increase the amount of a personal loan once you have accepted the terms but it is not impossible. You have to check with your lending partner to determine what options are available for you regarding this matter. Home equity lines of credit, have a maximum value to them, which is the total amount of equity in the home. While this gives owners the freedom to expand their credit as needed as long as they are under the maximum equity, it does little to protect them. A personal loan is designed to allow the accepter of the loan to keep their financial situation more manageable. It has a set amount, which is rarely able to be altered and gives you the peace of mind knowing that your payments will not change from month to month. This security makes it easier for someone to repay their debt and live within their means during the duration of the loan.